After a long first half of the year, the housing market appears to be making a comeback now that we are headed into the summer months. According to our monthly State of the Market report, inventory across the country has risen for a second month in a row. This is good news for home buyers, as more houses on the market means less competition from other prospective buyers.
Our data indicated that there were 3,574 more homes on the market in June compared to May.
This good news comes with a catch. While inventory is up, the list price per square foot also increased in the past month. The figure increased from $179 in May to $181 in June. This price increase means that inventory has not risen to the point where home prices will fall. Still, if the trend of rising inventory holds, prices will begin to fall in the next several months.
Another important fact to note is that, in the past month, interest rates for a 15-year fixed-rate mortgage and a 30-year fixed-mortgage rate have increased.
According to Bankrate.com, the interest rate for a 30-year fixed-rate mortgage increased from 4.06 percent to 4.38 percent in June. Over the same period, a 15-year fixed-rate mortgage increased from 3.19 percent to 3.46 percent
This increase in the mortgage rate can have a twofold effect. First, some home buyers might consider purchasing a home before the rate increases again. Second, home buyers who purchase in the future will have limited buying power because they will not be able to take out the same size mortgage.
When examining the increased interest rates on a larger scale, their elevation coupled with more inventory might stymie rising home prices.
State of the Market Report
Our monthly State of the Market reports looks at 38 geographically diverse cities throughout the country. We examine each city’s median list price per square foot and inventory level. The data we collect is used to measure the current real estate market through a price per square foot index and a tabulation of total inventory level. All raw data used in our report comes from the Multiple Listing Service.
You’ll find a detailed analysis of our indexes below. We’ve broken each index into three parts that examine information on a year-over-year basis, significant changes on a city level, and on a month-over-month basis.
List Price Per Square Foot
Across the cities we track, our index showed the list price per square foot increased for 36 of the 38 cities. The list price per square foot increased by 15 percent, rising from $158 in June 2012 to $181 by the end of June 2013.
Cities that saw the greatest increase were Sacramento, Phoenix, and Oakland. The two cities that saw a decline were New Orleans and Chicago.
- Sacramento: In the past year, Sacramento witnessed a drastic increase in the list price per square foot of homes on the market. In June 2012 the average home listed at $91 per square foot. At the end of June the price was $153, a 68.1 percent increase.
- Phoenix: The average list price per square foot for a home in Phoenix increased by 44.8 percent in the past year. The price jumped from $87 in June 2012 to $126 at the end of June 2013.
- Oakland: The already steep price for a home in Oakland increased from $221 per square foot in June 2012 to $304 in June 2013. This is a 37.6 percent increase.
- Chicago: In June 2012, the list price per square foot was $155. A year later the figure dropped to $150. This is a decrease of 3.2 percent.
The monthly list price per square foot has increased steadily throughout 2013. For anyone who keeps track of these things, the increase in price should come as no surprise. At the end of June, our index showed the list price per square foot was $181, up from $179 in May and $177 in April.
As we mentioned earlier, however, look for the list price per square foot to drop as more homes come onto the market.
Total Inventory Level
On a year-over-year basis, 32 of the 38 cities we track saw a drop in total inventory. The total inventory across the cities we track is down by 20.5 percent over the same time last year. In June 2012 there were 119,014 homes on the market, compared to 94,640 a year later. This is a loss of 24,374 homes.
The cities with the largest drop were Sacramento, Detroit, and Boston. On the opposite end of the spectrum, Las Vegas saw an increase in inventory.
- Sacramento: In the past year, Sacramento’s housing market lost 1,325 homes. Twelve months ago there were 2,433 homes on the market, while at the end of June there were 1,108 homes for sale. This is a 54.5 percent decrease.
- Detroit: The Motor City’s inventory dropped by 47.1 percent in the past year, going from 3,298 in June 2012 to 1,108 in June 2013. This is a loss of 1,554 homes.
- Boston: Beantown, which already had a low housing stock last year, lost 46.7 percent of its homes. At the end of June 2013 there were 856 homes on the market, compared to 1,607 the year before. This is a loss of 751 homes.
- Las Vegas: Sin City had a significant increase in housing inventory. In the past year the number of homes on the market increased by 18.2 percent, going from 3,254 in June 2012 to 3,847 in June 2013.
As we’ve mentioned in the past, our data shows a flat-to-slight increase in total inventory across the cities we cover. From May to June there was an increase of 3,574 homes across our 38 cities. In May there were 91,066 homes on the market, while at the end of June there were 94,640 homes for sale.
As the year progresses into the summer months, inventory will theoretically increase along typical seasonal patterns. There is already some evidence of this. Inventory has increased steadily, if slowly, since April.
State of the Market
Our data indicates that it is still a seller’s market, with a strong possibility that as the summer rolls on more homes will come on the market and housing prices will decrease. At that point, the market will transition to a buyer’s market.